Mortgage Application Process Explained

Loan Officer Interview:
The loan officer will ask you a series of questions, in person or by phone to determine if you will qualify to proceed with the mortgage application process. The loan officer will ask if you had any bankruptcies, foreclosures in the past couple of years. Most lenders will not consider a loan request if the applicant recently was release from bankruptcy or foreclosure. It’s also very important to satisfy any judgements or liens before applying for a mortgage.

Employment History:
The loan officer will ask the name of your employer and your gross monthly income. A steady employment history of two years or more at current job is required. If you worked for a company less than two years, your employment should be in the same field or line of work. The lenders want to see a steady work history to make sure you will pay the monthly mortgage payments. Your debt to income ratio should be below 40% to qualify for a loan with most lenders.

Pulling Credit:
Your credit score must be at least 620 or more to be considered for a mortgage loan. Recently, a number of lenders have increased their mininum credit score, making it harder to qualify for a mortgage. But there is at least one lender I know of that will accept a credit score in the low 600’s. The amount of debt vs the amount of available credit is important. Ideally your debt to credit ratio should be no more than 30%. Making your payments on time is also very important. Avoid late payments over 30 days due. Your payment history accounts for 35% of your credit score.

Good Faith Estimate:
After it’s determined that you qualify for a loan, the loan officer will find a lender in his or her computer system that best fits the client’s needs. The good faith estimate lists the expected cost of the loan. The form will include the down payment amount, interest rate, points, fees and costing costs.

Required Paperwork:
Once you have obtained been pre-qualified with an acceptable debt to income ratio and credit score, the next step is submitting the required paperwork to the lender’s underwriting dept. Items needed: last two years of W2 forms and tax returns, recent pay stubs, bank statements usually last two or three months.

Application:
The standard “1003″ mortgage application will ask for a list of assets, such as 401k, IRA, CD’s, investments, etc. Liabilities, such as, personal loans, credit cards, car loans, student loans with account numbers are also needed. Your employer’s name and address and income, applicant’s social security number, date of birth are included.

Underwriting Process:
The lender will receive a loan package from the loan officer with all the required forms the mortgage underwriter will need to make a decision to approve or decline a loan application. The period for a approval varies from lender to lender, but usually takes between 3-5 business days. Once approved, the applicant will received an approval letter showing the maximum loan amount available. It’s good to get pre-approved before putting a contract on a house. Your offer will be much stronger than without it.

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